In a continued effort to come out of a prolonged market slump, major steel companies in Korea are aggressively pushing for restructuring, focusing on eliminating low-profit business sectors.

The nation’s third-largest steelmaker Dongkuk Steel recently said through a public announcement that it is considering cutting out its thick steel plate manufacturing division, one of its representative business categories.

Thick steel plates, which are mostly used in large vessels and bridges, are heavily dependent on trends in the shipbuilding and construction industries.

“Though there are speculations that the shipbuilding economy has hit bottom and is now on the verge of recovery, the actual business situation is still very much negative,” said an official from Dongkuk Steel.

Reflecting the shipbuilding slump, the nation’s total consumption of thick steel plates has been declining, from 12 million tons in 2011 to 11 million tons last year. This year’s figure is expected to remain as low as 9 million tons, according to officials.

With the downtrend of the market, the profitability of thick steel plates has been falling drastically.

Dongkuk Steel, which is highly dependent on its thick plate sector, saw its debt ratio rise from 228.8 percent of assets at the end of last year to 241.9 percent at the end of June, officials said.

“The division of the thick steel plate sector may cause immediate damage on the company’s financial status as it is one of the key businesses, but will help boost the profit level in the long term,” said the official.

Dongkuk Steel is also challenged by larger steelmakers such as POSCO and Hyundai Steel, which have recently been boosting their manufacturing capacities in an effort to expand their share in the steel market.

The country’s second-largest Hyundai Steel in September kicked off a third blast furnace in Dangjin, pledging to boost their competitiveness in the ship and automobile sector. The company also chose to absorb the cold-rolled mill business from its affiliate Hyundai Hysco.

Likewise, top player POSCO started operations of a new furnace in Gwangyang this June, which became the world’s largest blast furnace.

Though the company has lately been selling off noncore assets to increase liquidity, it still plans to maintain its steel manufacturing initiative.

“The nation’s steel industry has now reached a mature stage, in which conventional business portfolios may no longer yield a visible profit,” said an official of the Korea Iron & Steel Association.

By Bae Hyun-jung (tellme@heraldcorp.com)